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This article talks about the rising prices of crackers, which has decreased the quantity of
their demand. Demand is the quantity of goods that consumers are willing and able to buy at a
given price over a given time period and the Law of Demand states that a change in a products
price will lead to a change in the quantity demanded of the product, if other factors stay the
same. Furthermore, rising awareness about their harmful impacts in Delhi has further reduced
sales. Being a non-price determinant of demand it has led to a change in their demand.
The author also highlights the role of crackers in leading to externalities, a side effect of an
industrial or commercial activity that affects other parties without this being reflected in the cost
and the necessary measures taken to control that externality.
Crackers were once crowd-pullers and during the Diwali festival shops had a tough time
meeting their demand. But with the rising prices of crackers as well as of other goods, people
have now cut down on the budget for firecrackers.
Figure 1: Change in quantity demanded of firecrackers

The above graph reflects the rise in prices from P to P1 leading to a fall in quantity demanded
from Q to Q1. As 'Mehangai', or steep price rise, is the final nail on the coffin, say shopkeepers.
Q
Q1 Quan ty of
Crackers
D
P
P1
3
0
%

P
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f

C
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X
Y
60%
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Also the price elasticity of demand for firecrackers is elastic, a change in price of a product
affects demand by a greater proportion as shown by lower sales of 60% for an increase of 30% in
just one year.
Crackers create noise and air pollution, as a result a negative externality of consumption
occurs. This is a cost not paid for by the producer or consumer carrying out certain activities but
are borne by society as a whole. Hence the government has to take measures in order to control
its consumption in the long run.
Figure 2: A decrease in demand due to public awareness about firecracker hazards

The above graph indicates the leftward shift of demand curve from D to D1 and the quantity of
crackers sold reducing from Q to Q1. The fall in the demand was due to negative advertisement
and social awareness created against the consumption of firecrackers by the government. Over
the last 10 years, schools across the city have been proactively discouraging students from
bursting crackers and reducing sales.
Q Q1
P
P1
D
D1
S
Quan ty of
Crackers
P
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Y
X
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Figure 3: Negative externalities of firecracker consumption

From the above graph its seen that Marginal Private Benefit (MPB), marginal benefits enjoyed
by a household or business in actually consuming or producing a good is greater than the
Marginal Social Benefit (MSB) which are the benefits experienced by the individual consumers
of a particular good, plus or minus any social or environmental benefits or costs. Consumption of
crackers lead to welfare loss, as the private benefit is more than the benefit to society.
Firecrackers are harmful to the health of children, senior citizens and animal, whether strays
or pets. The toxic effects of pollutants increase incidences of respiratory diseases amongst
employees as well as consumers. The cost to society from increased insurance and health costs
due to burn injuries and damage to properties, can be reduced by increasing taxes on the
consumption of crackers. This will bring the MPB close to Pareto Optimality level, a situation of
no market failure where the marginal social benefit is equal to the marginal private cost and thus
prevent market failure, where the social cost of production exceeds the private cost.
MSC
Welfare loss
MPB
MSB
Q1 Q*
P*
P1
Quan ty of Crackers
X
P
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o
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C
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Y
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By imposing taxes the government will earn revenue, which can be used to control the level
of pollution created by the consumption of crackers. In the short term it will lead to loss of jobs
but in the long term it will increase welfare to society.
The government has already taken steps to increase public awareness and advertise the
negative aspects of firecrackers. This will reduce consumption but in the process the government
is bearing a huge burden of advertising costs, which needs to be funded from the governments
revenue, thus reducing it. Liabilities or penalties for damage to property and innocent bystanders
will ensure responsible use.
The government can also apply regulations limiting or prohibiting use of firecrackers. This
will reduce noise and air pollution but imposing a ban will reduce government revenue collected
in the form of taxes on crackers as well as increase unemployment in the industry. Alternately,
guidelines restricting decibel levels and the use of newer eco-friendly crackers containing less
chemicals that emit less smoke can be used. Thus, improving the health of the environment and
its inhabitants.